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It's not just the subprime stew that helped slide the housing market into a slough. Housing is also mired in a muskeg of failing "Alt-A" mortgages.

Suffering from the same untried underwriting and difficult to decipher disclosures that swamped subprime borrowers with foreclosures, "Alt-A" loans made in 2006 suffered 90-day or longer delinquency rates 2.5 times higher than those made in 2005 and 4 times higher than those in 2004, according to LoanPerformance data crunched by analysts at Standard and Poors.

"I've been around a long time Junior. You may buy something in the next few years, but I can guarantee you it won't be any deal."

Aww, you called me junior... that really hurts my feelings!

I wish I was in my 50s now too, that way even if I was completely wrong, just like you, I could still try to hold my greater age over people's heads as if being old and ignorant is somehow better than being young and informed.

As for whether or not it will be a "deal," I can guarantee you I will spend a LOT less than if I had taken your stupid advice and bought something at the peak of the biggest RE bubble this country has seen in about 80 years.

"You will pay market just like 99% of buyers."

Yeah, forgive me for not buying into your predictions considering your dismal track record in that regard.

The fact of the matter is that even IF I bought at market I would still come out far ahead of where I would have if I had purchased something right at the peak of the bubble like you advocated here before running off.

Oh yeah, and you DID run off. Even now that you are gone you are still a running joke around here for trying to play the expert while failing to understand the fundamentals of the market.

I am sorry if this is a bit long, and that it doesn't mention housing directly, but read this information and substitute traders for F'ed Buyers and Positions for housing and it becomes crystal clear.

http://www.financialsense.com/fsu/editorials/dorn/2007/0311.html

http://www.financialsense.com/fsu/editorials/dorn/2007/0311.html

QUICKSAND by Janice Dorn, MD, PhDThe Trading DoctorSMMarch 11, 2007

Pain is what you walk through. Misery is what you sit in.

Take an old pair of jeans and cut a hole in one of the front pockets. Now, start pouring sand into that pocket. What happens? Sand runs down your leg and to the ground. What do you do? Keep pouring until the sand is up to your ankles? Your knees? Your waist?At what point do you realize and act on the fact that no matter how much or how fast you pour sand into the empty pocket, you have a hole in your pocket? At what point do you come to the conclusion that you either have to stop pouring sand or just take off the pants and run away as fast as you can?There are many who will keep pouring until, eventually, they are up to their neck in sand. Suddenly, it begins to feel like quicksand and they are trapped, and can't get out now matter what they do. At that point, the feeling changes to one of being drawn downward into the quicksand, unable to breathe, choking and suffocating into the murky slime. I know this feeling so well and have etched it on my brain so as never to forget it.This is how it feels to lose. The hole in your pocket is the losing position. The sand is your mental, emotional, physical, financial and spiritual capital just pouring out until you are drained, suffocating, have nothing left to give and are literally sinking in the sand of your own creation. Losing is comprised of excruciating, stabbing pains and a kind of mind-deadening tunnel vision. Everything feels differently when you are in a losing position. The experience of time changes and seems to slow down to a snail's pace. Physical health deteriorates due to the outpouring of stress hormones such as cortisol. In the same manner that going long in the markets is not the inverse to going short, losing is much more than just the absence of winning.I spoke with a trader yesterday who told me that the instant a position went against him, he cut it and moved on. I spoke with another trader today who told me he was down nearly 50 of his entire portfolio on two positions which he had been holding for nearly five months and that he could not cut it because it was too late, too much money lost and he was trapped. Perhaps you can identify with one of these traders, and perhaps not? Most certainly, if you have been trading for any period of time and you have not employed a rigorous stop loss discipline, you have felt your physical and psychic energy going into a losing position.The trader who cuts his position immediately is out the commission and the (usually very small) drawdown. The trader who is holding a 50% portfolio loss does something that is quite common and damaging. The trades almost immediately went against him, but he did not get out. He stayed with them, holding and hoping and turned two losing trades into investments! The mind has a unique way of playing such tricks on us. Since he could not take the losses or honor stops, he played every manner of brain game with himself and decided that the positions would "come back one day" and entered onto the slippery slope of hope. If a portfolio is down 50%, what percent does one need to make in order to recover back to break even?The feeling of losing is persistent, relentless and devastating. It eats at the very core of a person, like a malignancy that metastasizes to every part of the body, killing one cell after the other. If it is not contained, losing truly feels like death. How does deterioration of psychological and physical capital with focus on a losing position manifest itself? Irritability, sleeplessness, continual searching for something or someone to affirm the losing position, anxiety and dysphoria, tick-itis (the toxic habit of watching every tick of the position day after day), rumination, self-deception, impairment of social and family activities and a litany of other unpleasant emotional and physical states. Perhaps the worst aspect of this is the spiritual decay which comes through as self deception and, often, deception of family and friends. One is rarely capable of owning true feelings of guilt, shame and inadequacy and shifts into a mind morph where a trade becomes an investment. Holding and hoping then set in.Of the panoplies of emotions that flood traders and investors on a daily basis, the most risky is hope. It becomes a passionate hope that, once the Market Mistress has seduced us, she will, one day, become kind to us and love us. If this is what you are thinking, it might be a good time to reassess what you are doing in the financial markets-- the greatest war game ever known to man.The most rigorously honest thing that I can say in response to this type of thinking is: Abandon hope. As extreme as this may sound, it is the only way to be consistently successful. Attachment to a losing position is a recipe for more unhappiness and illness than any one of you deserves. Eschew complacency and mediocrity, both in trading and life. Cut losers quickly and do not sit around waiting for The Market Mistress to rescue you. If you do not begin to accumulate regret by cutting losses quickly, you are at risk for not learning.Who can say what is waiting for you at the bottom of the slippery slope of hope? Get yourself out of the sand and get out before it is too late. Suffering is optional and you are in control. Take the power and use it to make yourself strong in the service of living and breathing with freedom to play another day.

The trouble with most people is that they think with their hopes or fears or wishes rather than with their minds... Will Durant (American Historian and Philosopher...1885-1981)

This quote from Will Durant sums up the mentality of the flippers, the effed buyers, the dot com paper millionares, etc.

I bought a car 18 months ago for $40,000. I have not changed the oil, or rotated the tires, I have not even washed the grim and road salt off. I know that with buyer incentives that this years model can be purchased for $38,000, but mine is up for sale for $50,000. Thats a nice profit for me of 25%, but i'm going to give the buyer a FULL tank of gas and a new fresh scent so you will never smell any cigar smoke. Any takers?

Lots of interesting things going on over at the housing tracker website. I like the "old" housing tracker data, as it goes back further. Asking prices are down about 10% YOY, and about 15% from their peak in late 2005. With inflation, that means real asking prices are probably about 20% down from their peak.

Anonymous said... "I bought a car 18 months ago for $40,000. I have not changed the oil, or rotated the tires, I have not even washed the grim and road salt off. I know that with buyer incentives that this years model can be purchased for $38,000, but mine is up for sale for $50,000. Thats a nice profit for me of 25%, but i'm going to give the buyer a FULL tank of gas and a new fresh scent so you will never smell any cigar smoke. Any takers?

JOhn"

Wow ... So you compare buying a depreciable asset like a car with buying a non-depreciable asset? ... Oh yeah, your walls and roof definitely are depreciable ... But the land on which they sit isn't. Once you grasp that concept, you'll be on the way to understanding why your analogy doesn't hold water. Good luck!

Lance's Quote,"Oh yeah, your walls and roof definitely are depreciable ... But the land on which they sit isn't."

Guess you never heard of the following places:Centralia PASultan Sea CAAny house near a superfund site.Fricks Lock PA (A stones throw away, literally, form a nuculear power plant. Feds forced everybody out due to the danger of radiation.)

How much would a house so close to a nuculear power plant, future prison or future junk yard be worth?

Show me where I told anyone to buy in 2005. I even divulged that I wasn't buying and hadn't put "new money" in the market since 2002 (except for tremendous bargains). Please explain how my 2005 predictions of a Market Correction of 25 -40% was coming was "completely wrong".

You, my friend, are the idiot. Yes, please tell me that I "ran away". I'll expect your rent check by the 5th. YOU are the joke.

"I even divulged that I wasn't buying and hadn't put "new money" in the market since 2002 (except for tremendous bargains). Please explain how my 2005 predictions of a Market Correction of 25 -40% was coming was "completely wrong"."

In other words, even Investor thinks Lance is full of it and that David J was right.

Lance said... “Wow ... So you compare buying a depreciable asset like a car with buying a non-depreciable asset? ... “

But “Lance”, it’s never been a better time to buy. Historically, automobiles are more affordable today than they have ever been. They’re not making any more automobiles (in Norfolk), better get in now before you’re priced out. And this Sunday only, buy now and take advantage of the EZ financing. You know you’re throwing money away renting a seat on the metro when you could buy now and lock in your monthly payments.

"BTW - I stand by that one sentence you managed to find. I have made a fortune buying in 2004 and 2005 (and, even, a couple hundred K in 2006)."

Uh huh... first you say you have put no new money into the market since 2002... then you say you made a fortune buying in 2004 and 2005. You can't even keep your story straight.

You are a perfect example of an "investor" who has tricked herself into believing that you are actually talented when the reality is you would have to be brain dead NOT to make a profit buying houses during the run-up to the biggest RE bubble in decades.

"If you think that I am "trapped" in my house, you are misinformed."

I am talking about you being a cripple. Do you think maybe you would be more on top of things if you could get out more?

Va_Investor looks at property purchases as investments because that is what they are for her - INVESTMENT i.e. a way to make her money work for her. ... Notable exceptions for her are her primary residence and her beach house. As she's mentioned many a time, she's not looking to make money on the beach house. She could have, but that would negate the reason she bought it. Consequently, when Va_Investor says she didn't buy in 2005 (or rather says she didn't buy much in 2005) she is speaking as an investor ... and not as a propective homeowner like the average bubblehead posting here. Whether she bought or not as an investor is irrelevant to a prospective homeowner. As I've tried infinitum to explain in earlier postings, the objectives and focus of a prospective homeowner shouldn't be mixed up with the objectives and focus of an investor. One doesn't buy a home as an investment... one buys it as a place to live in for the long term. There are many many differences between the two. Among them: an investor can decided from one day to the next to "just sell" and make a profit ... a homeowner cannot. A homeowner has lots of other considerations such as "where will the kids go to school if we sell this house?" ... "where will we move to?" etc. An investor looks at a single property and makes buy/sell decisions based on one thing profit from the transactions. A homeowner has to look at a whole range of things and decide "Will this home give me what I want from a home and can I afford it?" A homeowner cannot look at one property in isolation. I.e., a homeowner cannot look at a property and say "Can I buy it for low and resell it" without considering what it'll cost to live elsewhere ... what it will cause in terms of life disruption, etc. A homeowner just needs to minize their housing costs over the longterm in a place that suits their needs. That's a whole different kettle of fish than what an investor is doing. Mixing the two objectives and thinking one is "an investor" is what will get prospective homeowners in trouble. Someone who understands what being a homeowner means won't for example be taking on an ARM or an Interest Only loan that they don't reasonably think they'll be able to afford when they reset. However, I really think bubbleheads have a problem understanding this distinction ... which is why they constantly like to throw up in my face the irresponsible buyers that HAVE bought irresponsibly. They can't seem to understand that they irresponsible buyers were trying to act like investors ... and not like homeowners. Va_Investor has done well investing ... and being a homeowner ... And one is wise to listen to her advice in both matters. But one has to be able to differentiate between the two activities ... and NOT confuse one for the other.

When I hear expressions like "going straight to the moon" it only serves to remind me (and every other knowledgeable person out there) why BHs are having such a hard time buying a home. They really can't understand that a home is NOT a financial investment ... at least not in the shortterm. Yes, over the longterm one receives many financial and other returns from being a homeowner ... But, these returns are only made possible by the non-quantifiable, non-financial returns one receives throughout the course of homeownership. These returns begin with "stability", "having a stake in one's immediate neighborhood and larger community", "having the choice to live as one chooses in one's own home ... including choosing the color paint you want on the walls", and "knowing that you --- and only you --- can decide how long you can stay where you're at". Yes, these are all individual "intangibles" ... But when compound over the years, they allow you to live a life that brings with it many returns ... including financial ones.

Being concerned over whether the value of one's home has "shot to the moon" or "crashed" over a 2 year period indicates that this anonymous doesn't understand the true value of homeownership.

"When I hear expressions like "going straight to the moon" it only serves to remind me (and every other knowledgeable person out there) why BHs are having such a hard time buying a home. They really can't understand that a home is NOT a financial investment ... at least not in the shortterm. "

Reading posts like this one make it clear why you ended up working as a computer tech rather than some kind of white collar job.

Your reading comprehension just plain sucks.

Just a week ago or so you were using a webpage to estimate the value of your house and trying to brag about how much "equity" you have... now that the stats are out for June, and once again it is obvious to everyone but you that houses across the area, including your neighborhood are falling.

Now you are going back to the whole: "so what if I overpayed for my house? I don't look at it as an investment so throwing away money is no big deal!"

You are doing the equivelent of telling someone to run out and buy a new car today even though they will be on sale next month because "cars aren't an investment."

Try to read section 1031 of the IRC (that is Internal Revenue Code) and see if you can figure out what I mean by "no new money".

It's not rocket science. Try not to comment on matters of which you have no understanding. It just makes you look foolish to venture into the, not so complex, aspects of real estate of which you are ignorant.

re: the Historic house in Herndon that went at auction last year for 540K.

Can you really dismiss comps with asking prices of 1.1 million and 989K as irrelevant? If so, you may as well sit back and wait for the 50% crash because you don't have the intellectual capablility to participate in this (or any) market.

re: my ability to make millions in a hot, cold, or average market.

This is beyond the scope of your limited experience and understanding.

p.s. re making a couple hundred in 2006. Some of you might remember me talking last year about buying lots in waterfront communities that did not "perc", but sewer had been approved. Well, they have tripled in value. You see, there is really no bad time to buy real estste - if you have some vision and brains.

And I am not a "criple" - not hardly. I am a Hall of Fame athlete from my alma mater. And I am not yet in my 50's.

"Some of you might remember me talking last year about buying lots in waterfront communities that did not "perc", but sewer had been approved. Well, they have tripled in value."

If that's the case, congratulations. I do remember you mentioning those, and it did seem like a good idea.

But really, you really would have been able to make your case better if you were more polite at the beginning and if you didn't defend Lance, who has humiliated himself repeatedly here.

It really seems you are resentful of David J's blogging success because he's "just a renter" and you have some sort of weird irrational dislike of those of us who wisely chose to forgo buying in the crazy market of 2005.

I'm going to be nice to you this time to see if you have the character to actually have a civil conversation.

"And I am not a "criple" - not hardly. I am a Hall of Fame athlete from my alma mater. And I am not yet in my 50's."

"I am often "housebound" due to an illness that caused me to "retire" 15 yrs ago. So I am on here often because I like to talk real estate and have little else to do. " VA_Investor Aug 12 2006

I think the above statement of yours from Aug does more to explain you than anything else you have said on this blog so far.

Stuck at home, "little else to do," so you come to a message board and try to convince everyone how great you are... even when everyone here can tell that what little knowledge you have is limited to the nuts and bolts side of transactions and that your ability to see the big picture is completely lacking.

Forgive me if I've lumped you in with some ignorant Anons, but I do believe that you have thrown a few stones - such as the "no new money comment" and the "nuts and bolts" comment.

I really don't care if others want advice from those who have NEVER owned. Whatever.

I wish that there were an investor forum because maybe I could learn something.

I think you are misguided to dismiss ideas from people that have 25 yrs experience in buying and selling RE, but to each his own.

As far as Lance, you miss (or forget) the fact that he bought a condo in the later 90's, when values were good. And, he was smart enough to sell it at the peak in 2005. He then bought an undervalued home in DC with a ten year fixed rate. How many here can claim the same success?

People in glass houses should not throw stones. I'd much rather make money "going in" than hope appreciation will bail me out. I've felt that way for over 25yrs. Wait for prices to fall and you get the same "deal" as everyone else. If that is what you want, then go for it.

I am an investor, even on my residence and second homes. Sorry.

I could find a great bargain in a week, if I wanted to. Most of you would rather piss and whine than do any actual work.